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GGAL vs. ITUB: Which Stock Is the Better Value Option?

Zacks Equity Research
ADM (ADM) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Investors interested in stocks from the Banks - Foreign sector have probably already heard of Grupo Financiero Galicia (GGAL) and Banco Itau (ITUB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Both Grupo Financiero Galicia and Banco Itau have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

GGAL currently has a forward P/E ratio of 8.43, while ITUB has a forward P/E of 12.02. We also note that GGAL has a PEG ratio of 0.52. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ITUB currently has a PEG ratio of 1.29.

Another notable valuation metric for GGAL is its P/B ratio of 2.42. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ITUB has a P/B of 2.53.

Based on these metrics and many more, GGAL holds a Value grade of B, while ITUB has a Value grade of F.

Both GGAL and ITUB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GGAL is the superior value option right now.


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Grupo Financiero Galicia S.A. (GGAL) : Free Stock Analysis Report
 
Itau Unibanco Holding S.A. (ITUB) : Free Stock Analysis Report
 
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